Rups Medipack Private Limited ., In re

FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, UTTAR PRADESH 

ORDER UNDER SECTION 98(4) OF THE CGST ACT, 2017 & UNDER SECTION 98(4) OF THE UPGST ACT, 2017

M/s Rups Medipack Private Limited, having registered office A-196,1ST FLOOR, SECTOR 83, NOIDA, Gautam Buddha Nagar, Uttar Pradesh, 201305 (hereinafter referred as “the applicant”) having GSTIN-09AAFCR4674K1ZT, have filed an application for Advance Ruling under Section 97 of the CGST Act, 2017 read with Rule 104 of the CGST Rules, 2017 and Section 97 of UPGST Act, 2017 read with Rule 104 of the UPGST Rules, 2017 in Form GST ARA-01 (the application form for Advance Ruling), discharging the fee of Rs. 5,000/- each under the CGST Act and the UPGST Act.

2. The applicant is a ISO 13485, ISO 11607 and CE certified company and manufactured micro barrier sterilization reels and pouches use by medical devices companies, Pharmaceutical Industries and Hospitals.

3. The applicant has sought advance ruling in respect of the following questions:-

1. What is the correct HSN code to be used for Sterilization Reels and Pouches manufactured by our company?

2. What is the correct rate of GST applicable to Sterilization Reels and Pouches manufactured by us under the said HSN code?

4. The question is about applicable GST rate under the provisions of CGST Act and liability to pay GST, hence is admissible under Section 97(2)(a) of the CGST Act 2017. Further, as per declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending nor decided in any proceedings under any of the provisions of the Act, against the applicant.

5. Statement of relevant facts having a bearing on the question(s) raised-

Applicant is a ISO 13485, ISO 11607 and CE certified company and manufactured micro barrier sterilization reels and pouches used by medical devices companies, Pharmaceutical Industries and Hospitals.

All medical devices companies which come in contact with human wound, flesh and blood needs to be sterilization to avoid infection. Sterilization is the process of killing contaminating micro organism. However there always is a time gap between sterilization of products and its use.

Thus there is a need by these products for protective cover, which allows sterilization even after packing, and at the same time packing help retaining sterility till its use. The company manufactures these protective cover called sterilization reels and pouches.

Manufacturer want to clarification to use correct one from below give HSN codes:-

I. HSN code 300590 with GST at the rate of 12%.

II. HSN code 39239090 with GST at the rate of 18%.

The Applicant is willing to determine the correct HSN code and rate of GST applicable to their products and ensure that they comply with the applicable tax laws.

6. The applicant has submitted their interpretation of law as under-

What is the correct HSN code to be used for Sterilization Reels and Pouches manufactured by our company?

1. As per the Chapter 39 of the CGST Tariff, Plastics And Articles Thereof –

2. As per the Chapter 30 of the CGST Tariff, Pharmaceutical Products

Let’s evaluate the terms used in the above clause:-

In common parlance the meaning of following terms are as under:-

“Chapter 39” Plastics and Articles Thereof.

“Chapter 30” Pharmaceutical Products

3.0 Our Understanding and Interpretation:-

3.1 According to Chapter 30 of die CGST Tariff, pharmaceutical products are classified under CGST Tariff and attract a tax rate of 12%.

Based on the above information, it is evident that invoicing for pharmaceutical products should be done under Chapter 30 with the given different HSN Code by the Manufacturer.

4.0 Business Process:-

4.1 As already mentioned in the business process in “Annexure I”, the Manufacturer is willing to determine the correct HSN code and rate of GST applicable to their products and ensure that they comply with the applicable tax laws.

4.2 Thus as per our interpretation and understanding, it indicates that the transaction falls under Chapter 30 of CGST Tariff of the CGST Act as the manufacturer is dealing in the goods mentioned in Chapter 30.

Therefore, based on the detailed submission provided, we believe that the classification of goods and services falling under Chapter 30 of Pharmaceutical Products should be considered under GST for this business process.

7. The application for advance ruling was forwarded to the Central Jurisdictional GST Officer vide letter dated 12.09.2023 and reminder letter dated 04.10.2023 to offer their comments/views/verification report on the matter.

Assistant Commissioner, CGST- Division-VJ, Noida has submitted his comments vide his letter dated 12.10.2023 wherein it has been submitted that-

7.1 From the description and information given for the product under consideration, it is clear that the product is not medical equipment but is the packing material which keeps the medical equipment sterilized after packing till the same is put to use at the end. The applicant has sought clarification as to whether the said product is classifiable under HSN Code 30.05 or not. As per Explanation (iii) of Notification 01/2017-Central Tax (Rate) dated 28.06.2017, the “Tariff item”, “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). Further, Explanation (iv) of the said Notification mandates that “The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. ” Therefore, in order to arrive at the right heading for any product the reference is required to be taken from the Customs Tariff Act, 1975 and schedule annexed thereto.

In terms of the referred Note 2 of Section VI of Schedule appended to Customs Tariff Act, 1975, primary condition for the product to classify under heading 30.05 is that it should be put in measured doses or for retail sale. The present product is not at all for retail sale as the applicant has themselves stated that the product is not medical equipment in its own or a pharmaceutical product but the packing material used for sterilized packing for the medical equipment.

Furthermore, heading 30.05 of schedule attached to Customs Tariff Act, 1975 reads as under:-

“30.05- Wadding, gauze, bandages and similar articles (for example, dressings, adhesive plasters, poultices), impregnated or coated with pharmaceutical substances or put up in forms or packings for retail sale for medical, surgical, dental or veterinary purposes. “

From the plain reading for the explanatory notes and the Section Notes it can be said that the product under consideration is neither for medical, surgical, dental or veterinary purposes nor it is the product put up for retail sale It is the product for use in packing of medical equipment and for end use at institutional level and not for retail sale or retail packing.

Therefore, the heading 30.05 is ruled out for the product under consideration.

7.2 In order to examine tariff item 39.23.90.90, as suggested by the applicant, for its product under consideration it is required to sec the heading 39.23 which reads as:

39.23 ARTICLES FOR THE CONVEYANCE OR PACKING OF GOODS, OF PLASTICS, STOPPERS, LIDS, CAPS AND OTHER CLOSURES, OF PLASTICS

Product under consideration is not excluded under the explanatory notes to the heading 39. 23 and the product is squarely covered under the heading 39.23 90 for either tariff items 39.23.90.20 or 39.21 90.90. Accordingly the applicable rate of tax to the product under consideration in terms of Sr. No. 108 of Schedule ill of Notification 01/2017 dated 28 06 2017 as amended is CGST-9%; SGST-9%.

8. The applicant was granted personal hearings on 27.10.2023 and 21.11.2023 which was attended by Mr. Ashu Daimiya, CA, Authorized Representatives on 21.11.2023 during which they reiterated the submissions made in the application of advance ruling.

DISCUSSION AND FINDING

9. At the outset, we would like to make it clear that the provisions of both the CGST Act and the UPGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the UPGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST Act / UPGST Act would be mentioned as being under the ‘CGST Act’.

10. We have gone through the Form GST ARA-01 filed by the applicant and observed that the applicant has ticked following issues on which advance ruling required-

(1) Classification of goods and/or services or both.

At the outset, we Find that the issue raised in the application is squarely covered under Section 97(2) of the CGST Act 2017. We therefore, admit the application for consideration on merits.

11. The applicant is a ISO 13485, ISO 11607 and CE certified company and manufactured micro barrier sterilization reels and pouches use by medical devices companies, Pharmaceutical Industries and Hospitals.

12. We have gone through the submissions made by the applicant and have examined the same. The applicant in the present application has sought advance ruling on following question/clarification-

1. What is the correct HSN code to be used for Sterilization Reels and Pouches manufactured by our company?

2. What is the correct rate of GST applicable to Sterilization Reels and Pouches manufactured by us under the said HSN code?

13. The applicant further wants the clarification to use correct one from the following two HSN Codes,-

a. HSN Code 300590 with GST at the rate of 12%; or

b. HSN Code 39239090 with GST al the rate of 18%.

14. From the description and information given for the product under consideration, it is clear that the product is not medical equipment but is the packing material which keeps the medical equipment sterilized after packing till the same is put to use at the end. The applicant has sought clarification as to whether the said product is classifiable under HSN Code 30.05 or not. As per Explanation (iii) of Notification 01/2017-Central Tax (Rate) dated 28.06.2017, the “Tariff item”, “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). Further, Explanation (iv) of the said Notification mandates that “The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification. “Therefore, in order to arrive at the right heading for any product the reference is required to be taken from the Customs Tariff Act, 1975 and schedule annexed thereto.

14.1. Heading 30.05 of schedule attached to Customs Tariff Act, 1975 reads as under:-

“30.05- Wadding, gauze, bandages and similar articles (for example, dressings, adhesive plasters, poultices), impregnated or coated with pharmaceutical substances or put up in forms or packings for retail sale for medical, surgical, dental or veterinary purposes. “

Furthermore, Note 1 and Note 2 of Section VI of Chapter 30 of Customs Tariff Act, 1975 is relevant here which reads as:

1. (A) Goods (other than radioactive ores) answering to a description in heading 2844 or 2845 are to be classified in those headings and in no other heading of this Schedule.

(B) Subject to paragraph (A) above, goods answering to a description in heading 2843, 2846 or 2852 are to be classified in those headings and in no other heading of this Section.

2. Subject to Note 1 above, goods classifiable in heading 3004, 3005, 3006, 3212, 3303, 3304, 3305, 3306, 3307, 3506, 3707 or 3808 by reason of being put up in measured doses or for retail sale are to be classified in those headings and in no other heading of this Schedule

Therefore, in terms of the referred Note 2 of Section VI of Schedule appended to Customs Tariff Act, 1975, primary condition for the product to classify under heading 30.05 is that it should be put in measured doses or for retail sale. The present product is not at all for retail sale as the applicant have themselves stated that the product is not a medical equipment in its own or a pharmaceutical product but the packing material used for sterilized packing for the medical equipment.

14.2. The Explanatory Notes issued by WCO throws more light on the scope of the Heading 30.05 when it clarifies that:

This heading covers articles such as wadding, gauze, bandages and the like, of textile, paper, plastic, etc., impregnated or coated with pharmaceutical substances (counter irritant, antiseptic, etc.) for medical, surgical, dental or veterinary purposes.

These articles include wadding impregnated with iodine or methyl salicylate, etc., various prepared dressings, prepared poultices (e.g. linseed or mustard poultices), medicated adhesive plasters, etc. They may be in the piece, in discs or in any other form.

Wadding and gauze for dressings (usually of absorbent cotton) and bandages etc., not Impregnated or coated with pharmaceutical substances, are also classified in this heading, provided they are pul up in forms or packings for retail sale directly to private persons, clinics, hospitals, etc., without repacking, and usually are recognizable by their characteristics (presented in rolls or folded, protective packaging, labelling, etc.) as exclusively intended for medical, surgical, dental or veterinary

The heading excludes bandages, adhesive plasters, etc., containing zinc oxide, and plaster-coated fracture bandages, not put up in forms or packings for retail sale for medical, surgical, dental or veterinary purposes.

14.3 From the plain reading for the explanatory notes and the section notes it can be said that the product under consideration is neither for medical, surgical, dental or veterinary purposes nor it is the product put up for retail sale. It is the product for use in packing of medical equipment and for end use at institutional level and not for retail sale or retail packing.

Therefore, the heading 3005 is ruled out for the product under consideration.

15. Now we will examine whether the product can be classified under HSN code 39239090. In order to examine tariff item 39.23.90.90 for its product under consideration, it is required to see the heading 39.23 which reads as:

39.23 ARTICLES FOR THE CONVEYANCE OR PACKING OF GOODS, OF PLASTICS, STOPPERS, LIDS, CAPS AND OTHER CLOSURES, OF PLASTICS

15.1 Here it may be pointed out that the party is into manufacturing of Sterilization Reels and Pouches used by medical devices companies. The packing material should be such that sterilizations should be retained because there is a time gap between sterilization of products and its use. The applicant has submitted that the inputs used to manufacture the products used for sterilization of Medical Equipments are Medical Grade Paper, Tyvek Paper, CPP Blue, CPP Transparent. CPP transparent films are basically transparent cast polypropylene films and widely known for its versatility, appearance and excellent performance. It offers flexible packaging. Thus the constituent of the product under consideration is both plastic and medical grade paper.

The product under consideration is not excluded under the explanatory notes to the heading 39.23 and the product is squarely covered under the sub heading 39.23.90.

On going through the Tariff item 39.23.90.20 , it is observed that the description is ” Asecptic bags*’ .The term Aseptic is commonly known as the state of being free from disease causing micro-organisms. There are two categories of asceptic : medical and surgical. General asceptic fields are used when key parts can be easily protected using a combination of micro-critical fields and non touch technique. Examples of general asceptic fields include sterile dressing packs, IVC starter kits etc. Therefore, the product manufactured by the applicant i.e sterilization reels and pouches may be classifiable under Tariff item 39.23.90.20.

However, the product manufactured by the applicant is Sterilization reels and pouches and therefore the product is not limited to ” Asceptic Bags” as specified in Tariff item 39.23.90.20. But the applicant is manufacturing sterilization products which safely fall under residual Tariff item i.e ” Others” of 39.23.90.90.

16. In view of the above discussions, we, both the members unanimously rule as under;

RULING

1. What is the correct HSN code to be used Jbr Sterilization Reels and Pouches manufactured by our company?

Answer : The HSN code to be used for Sterilization Reels and Pouches is 39239090.

2. What is the correct rate of GST applicable to Sterilization Reels and Pouches manufactured by us under the said HSN code?

Answer: The correct rate of GST is 18% (CGST @9% and SGST @9%).

17. This ruling is valid only within the jurisdiction of Authority for Advance Ruling Uttar Pradesh and subject to the provisions under Section 103(2) of the CGST Act, 2017 until and unless declared void under Section 104(1) of the Act.